Persian Gulf crude exports have recovered to about 80% of pre-war levels, but oil remains stuck near $100 a barrel. Getting volume through the Strait of Hormuz has not brought back cheap supply, as last week's Brent price settled around $102.7 per barrel.
Exports passed 14 million barrels a day last week for the first time since the Iran war began Feb. 28, The Kobeissi Letter noted. That volume is more than 210% above March's low of about 4.5 million. The newsletter credited the U.S. military with securing the strait and opening a two-way corridor along Oman's coast.
Kpler said regional crude exports excluding Iran averaged at least 16.5 million barrels a day from Sept. 1 through Sept. 28. Standard Chartered estimates Saudi exports rose to 6.9 million barrels a day in September from 2.45 million in August. Saudi shipments moved back through Hormuz after an attack on the kingdom's East-West pipeline and Houthi strikes in the Red Sea.
Refined fuels are lagging. Gasoline, diesel and jet fuel shipments remain near 50% of pre-war levels because some damaged Gulf refineries have yet to fully restart, Kobeissi said.
Hostilities Accelerate
The U.K. Maritime Trade Operations has reported seven strikes on vessels near the strait's narrowest point since Sept. 28, the Wall Street Journal wrote. The Islamic Revolutionary Guard Corps navy warned ships away from the U.S.-backed route.
“Don't trust U.S. Navy and don't use south corridor at all and don't put your life in danger,” said a radio message reviewed by the newspaper.
Targets included the Kuwaiti supertankers Al Funtas and Kazimah III, according to Kpler. Rory Johnston, founder of Commodity Context, estimates flows are down 2 million to 3 million barrels a day.
“The recent pace of flows, while impressive, has never been sustainable and has already come at great expense,” he said.
“The step-up in attacks on ships highlights how the current equilibrium in the oil market is fragile and could easily be shattered,” said Hamad Hussain, senior economist at Capital Economics. The risk is higher because President Donald Trump is weighing renewed military action against Iran.
The Cost of Supply
A former Bridgewater economist Bob Elliot said the price math was simple when the war started. The economy was strong, supply was constrained, and Saudi Arabia couldn't act as a swing producer. He estimated that a 10 million barrel-a-day shortfall should add $50 to $80 a barrel to pre-war prices near $60.
The rebound restored volume, but not low costs. Ship-to-ship transfers off Oman may have reached 7 million barrels a day in September, Elliot said, adding $30 to $40 to every incremental barrel.
Shipbrokers told the WSJ each shuttle round trip costs $30 million to $40 million before insurance. Add longer voyages and higher insurance premiums, and “spot trading north of 100 bucks looks right in line with fair value,” Elliot wrote.
“All of this suggests that Middle East exports—at least for crude—are rising, but at enormous cost,” HSBC analyst Kim Fustier wrote. Consumers see even less relief. Extra crude does little to fix refining capacity, so spot crack spreads remain near all-time highs.
Positive Outlook
Futures point to relief. Dated Brent trades in the $120s, while the futures curve prices crude in the $80s by next spring. Traded forward crack spreads have fallen about $20 a barrel. Elliot attributes part of that to hedging and says it supports “a roll-sensitive strategic position.”
“Blockades have always been beaten by ingenuity over time; the question is largely at what price,” he wrote. With an inventory squeeze now less likely, “a lot of the upside in oil is likely in the past.”
